Cruise industry leaders, business owners and tour operators around the state are preparing for the possibility of a sharp decline in business this year. A loss of industry-generated revenue has been projected as cruise lines make plans to pull ships out of the Alaska market. Those who rely on tourism to survive say they are not only fearing losses in 2009 but are also making plans for 2010.

Alaska braces for loss in tourism revenue040109
NEWS1CCW Staff Writer Cruise industry leaders, business owners and tour operators around the state are preparing for the possibility of a sharp decline in business this year. A loss of industry-generated revenue has been projected as cruise lines make plans to pull ships out of the Alaska market. Those who rely on tourism to survive say they are not only fearing losses in 2009 but are also making plans for 2010.

Tourists walk past booths selling shore excursion tickets during the 2008 tourism season. Tour operators are expecting fewer visitors and less spending from those who do come to Alaska.

Photo By Libby Sterling

A cruise ship leaving Juneau down the Gastineau Channel.

Photo By Libby Sterling

The lights of downtown Juneau as seen from the Mount Roberts Tramway.

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Wednesday, April 01, 2009

Story last updated at 4/1/2009 - 11:06 am

Alaska braces for loss in tourism revenue

By Libby Sterling | CCW Staff Writer

Cruise industry leaders, business owners and tour operators around the state are preparing for the possibility of a sharp decline in business this year. A loss of industry-generated revenue has been projected as cruise lines make plans to pull ships out of the Alaska market. Those who rely on tourism to survive say they are not only fearing losses in 2009 but are also making plans for 2010.

Ron Peck, president and chief operating officer of the Alaska Travel Industry Association, said that his outlook on the situation is "grim at best and very challenging and debilitating at worst."

This year cruise prices have dropped to as low as $400 in an attempt to fill the berths. Peck said he has never seen a price so low during his long career in the travel industry.

"By discounting ... you attract a type of visitor that doesn't have the same discretionary dollars," Peck said. "The ships may be full, but those visitors aren't going to spend as much. That affects shore excursions, restaurants and gift shops."

Peck said this year ATIA reallocated a portion of their existing budget, about $675,000, into specific marketing promotions in hopes of encouraging summer travelers to make their reservations between January and April. Compared to previous years, more potential visitors are delaying or cancelling their trips.

John Binkley, president of the Alaska Cruise Association in Anchorage, is facing concerns on a number of levels. A Fairbanks resident, Binkley's family owns and operates a company that has offered riverboat and gold mine tours during the summers since 1950. The company usually hires up to 150 employees each summer, but that won't be the case for 2009.

"We're down about 38 percent from where we would normally be," Binkley said. "That translates into 40 to 50 jobs that we won't fill. That concerns me because they're people I know. They're real people."

Binkley said in the case of destinations in the Interior, they have to rely on the independent traveler and cruise ship passengers who also purchase the land tour. It's a little easier to guarantee business in a port town that offloads thousands of visitors every day.

Binkley is also deeply concerned with the condition of other tourism operations around the state. One of his chief concerns lies with rerouting announcements from several cruise lines for the 2010 season. Many ships that currently cruise from Southeast across the Gulf of Alaska to the turn ports of Seward or Whittier will be taken from the Alaskan market and sent to operate elsewhere. The gulf ships that will remain will not unload as many passengers with the opportunity to travel in Southcentral and the Interior. Instead, they will simply turn around and head back across the gulf turning what used to be a 14-day trip by land and sea into a 14-day cruise.

"It's a concern to both Southcentral and Southeast," Binkley said. "The combined effect is over 100,000 people."

In comparison to the rest of the world, cruise operating costs in Alaska are very high. According to Binkley, that is one of the reasons ships are being reassigned to other destinations.

LOCAL IMPACT

Lorene Palmer, president and CEO of the Juneau Convention & Visitors Bureau, said she expects the number of cruise visitors to Juneau to be down about 10 percent from last year. Though it's a little more difficult to track the number of independent visitors, she said she expects to see between 15 and 20 percent less of them.

Despite the fact that visitor numbers are declining, Alaska is still as desirable a destination as it always has been, Palmer said. The hope is that due to low cruise prices, visitors might have more discretionary funds to spend on things like shore excursions, souvenirs and dining. However, there is no guarantee that visitors will have that extra money. It will be dependent on the current situation of the economy and the psychology of the consumer, Palmer said.

"We always want to keep hope for the future," Palmer said. "We've gone through economic ups and downs in time. That's the nature of the market."

Fred Reeder, port director at Cruise Line Agencies of Alaska in Sitka, said it's taxes that have made Alaska too expensive for people who think it's an expensive destination in the first place.

"Unless we can get rid of the $50 head tax, I don't think there's any real change that's going to change the cruise industry in Alaska," Reeder said. "I've talked to store owners (in Sitka) that are hiring less people. I'm worried whether some of them will even survive as viable businesses."

In the past 15 to 20 years, the cruise industry in Alaska has seen a fairly steady growth, Reeder said. But with the country's current economic situation, continued growth is unlikely.

The fewer passengers who offload into ports of call, the fewer shore excursions will be purchased. This is a concern to many shore excursion operators and they are preparing to cut back.

Jeremy Gieser, operations manager at Gastineau Guiding in Juneau, said he's less concerned in his expectations for the 2009 season than for that of 2010. He will likely hire a few less employees this year but will definitely cut back on hiring in 2010.

"I think tourism in Southeast is going to be better than in other parts of the state," Gieser said. "The biggest hits are going to happen in the interior."

Much of the uncertainty comes from the fact that no one can accurately anticipate how much money people are going to spend. In 2008, the Juneau Convention and Visitor's Bureau projected that each cruise ship passenger would spend an average of $186. At over a million cruisers, that adds up. With a decrease in passengers and an unstable economy, industry leaders agree that the number is likely to be less in 2009.

Rachel DeSpain, co-owner of Alaska Zipline Adventures in Juneau, is also facing challenges in her business, but she said she is hopeful.

"I think we are all prepared for the possibility of fewer tourists, although it's a guessing game," DeSpain said. "We try to be positive and hope for the best while being practical and cutting unnecessary costs."

DeSpain said the zipline's early bookings are right on target, but the company is still being strategic in their hiring process. They plan to cross-train their employees more than they have in the past in hopes that the flexibility will allow them to handle whatever challenges the season throws at them.

"We are staying well-informed, but these are turbulent times and I think it's too difficult to predict anything for sure right now," DeSpain said. "We are certainly being cautious and flexible so we're prepared for what the future brings. For now, things are looking good and we are doing our best to adapt to the changes so we can stay ahead of the curve."

SILVER LINING?

Though Alaska's travel industry has some challenges ahead, many in the field believe that there are opportunities to be found in the midst of the challenges. For one, the price of gas is down from last year. Ron Peck of ATIA said he hopes that may encourage non-cruise travelers to find their way north.

"Just because the cruise industry might not fill their ships, the independent travelers may come to Alaska via the highway or on an airline," Peck said.

Low cruise prices may also be a benefit to Alaskans

who want to see more of their own state from a different perspective. Considering the low prices, many Alaskans may book a cruise as an alternative to riding the ferry or buying a costly airline ticket.

"I believe Alaska is a great destination," Peck said. "People still want to come to Alaska because they've heard about our mountains, glaciers and wildlife. They want to come, see and experience Alaska. We're in this downturn because of the economy (but) we'll make it. We as an industry are resilient and will come back."